For the small fee of just $100, those looking to open a microbusiness for cannabis cultivation in New Jersey can apply.
Unfortunately, that’s just the beginning.
Grown In spoke with one South Jersey microbusiness applicant, who wishes to remain anonymous at this time, who walked us through the costs surrounding the venture.
“Just for the first and second rounds of applications it is going to cost $90,000,” said the anonymous applicant. “I couldn’t do the application, no one could, not with everything they have in there. We hired a consultant out of Colorado to do it the right way.”
A microbusiness for cultivation in New Jersey is defined as an operation with no more than 10 employees at a time and no more than 2,500 square feet with a canopy height of 24 feet. The process must not allow for more than 1,000 mature plants each month and no more than 1,000 pounds of usable cannabis each month.
“Most projects nowadays average about $350-450 per square foot,” said Michelle Foote, an account executive with Urban-Gro. “The price can go higher the more that is automated, but with a micro grow, you can do less automation, but it will increase labor cost.”
The Colorado-based Urban-Gro helps businesses with as much as they want, from a full buildout with racks and lighting and even follow up resources to help keep their clients within regulations. Foote says a single tier operation will require around 9,500 square feet when restrooms, break rooms, offices and all accompanying necessities are added in.
For a facility like that, the low end of costs would be about $3.325 million.
“There’s a lot of surprise when numbers start getting thrown around, for sure,” said Foote. “I think a lot of people think maybe a building with 4-5,000 square feet, but when you have a dry room, a trim room, packaging and shipping and a water room, it all adds up.
“You’re going to be cultivating at a commercial level. So, I think the biggest misconception of a micro grow is what the size of the building needs to be.”
Once the conditional license is awarded, our source says they were given a timeframe of 30 to 60 days before hearing back from the state, an applicant will have 120 days to finalize the process, turning a conditional license to a conventional one .
“It’s a tiny window,” said the applicant. “I think it cuts out the small guy that can deal with an indoor grow. You sit down and investigate and I think realistically for the size of the building and to stay within regulations, it’s going to cost a million bucks.
“To fit the space requirements, you are going to spend $100,000 just on [plant] racks. That’s the only way you can do it. You can’t do a single-tier grow and expect to get five to six turns a year. And if you don’t do that, you won’t be profitable.”
These costs only matter if the township will approve the facility for a cannabis related business, after which they will then be owed two percent of the cultivator’s revenue. Our source mentioned they found just two New Jersey banks that will get involved in the cannabis industry, adding to the frustration.
“We put together 30-35 pages not including the documents requested,“ said Angelina Ramirez, Director of Strategy for White Lily, a minority and woman-owned applicant for a microbusiness cultivation license. “I know $90,000 for legal fees sounds like a bit much, but we budgeted about $150,000 just for the application process.
“We have been lucky enough to have municipal approval, but everyone has a different estimate, and we have gotten ranges from $700,000 to $1.4 million for the buildout.”
The next question is: Who would a microbusiness cultivator sell to? There are currently no adult use dispensaries open in the state, with applications not accepted until March 15.
“You can’t go in too early,” said the applicant. “You can’t rent space to sell product if you don’t know how long down the line it is to get recreational strains. No one can spend any money yet.
“I have attorneys on board, costs mapped out for the building. There’s just so many things you have to go through to set up. If they award everything in March, maybe I could be open this time next year.”
That’s with any luck. With COVID-19 still affecting the supply chain, our anonymous applicant has put a six month timeframe on getting the racking for the facility, with another four months for any HVAC equipment or LED lighting. Foote concurred.
“From a lighting standpoint, you are looking at around 6 to 8 weeks,” said Foote. “It’s really the racking that has the longer lead times right now at 12 to 22 weeks. HVAC equipment is 22 to 24 weeks out, so there is a lot of planning that needs to happen.”
The good news is that there is a lot of interest in supplies and buildout ideas coming from the Mid Atlantic region. With legalization on the horizon in the area, Foote is fielding plenty of inquiries for applicants getting ready for the cannabis boom.
“New York and New Jersey are probably the two hottest markets from a planning stage,” said Foote. “The opportunities there are endless, and we think Pennsylvania and states south of that will follow suit.”